Cisco Systems said on Wednesday that earnings fell 46 per cent in its latest quarter, but the profit beat Wall Street expectations. Cisco chief executive John Chambers said business conditions were improving for the world's largest network equipment manufacturer but he cautioned that it was too soon to call a recovery, dragging its shares down 3 per cent.
'We saw a number of positive signs this quarter in the economy and in our business,' Mr Chambers said in a statement. He added that if trends keep improving, there's a good chance the latest quarter was a 'tipping point'.
'While this is a very important trend, I would want to see the sequential trends continue for several more quarters before we'd be comfortable with saying that we are returning to normal business momentum,' he told analysts on a call. Cisco is one of the first large-cap technology companies to report results that include sales from most of July, making it an early indicator of trends in technology spending. Cisco has seen sales hit hard as clients delayed investments and capital improvements. However, good profit margins and a large pile of cash have helped it ride out the downturn.
The company posted a profit of US$1.1 billion, or 19 US cents per share, for the fiscal fourth quarter, which ended July 25. That was down from US$2 billion, or 33 cents per share, in the same quarter last year. Sales fell 18 per cent to US$8.5 billion. Excluding the cost of stock-based compensation and other items, Cisco's earnings were 31 cents per share. Analysts polled by Thomson Reuters were expecting earnings of 29 cents per share on US$8.5 billion in revenue. Cisco's revenue outlook was mostly in line with Wall Street's expectations and profit for the July quarter exceeded forecasts. But the CEO's cautious remarks disappointed those who sought a stronger declaration that global technology spending was on the mend. Analysts said his comments made sense amid mixed economic data, but likely let down investors who have been betting on a recovery in technology demand. 'When he qualified that statement and said we've got to wait and see for several more quarters, I think maybe that was a little more conservative than what the Street wanted to hear,' said Ronald Gruia, an analyst with Frost & Sullivan.
Cisco said it expects fiscal first-quarter revenue to fall by 15 to 17 per cent from a year earlier. That was in line with expectations for a drop of about 16 per cent, according to Reuters Estimates. That outlook represented a quarter-on-quarter rise of one to 3 per cent, a key improvement after a steep quarter-on-quarter decline in sales earlier in the year. Many analysts, including RBC Capital Markets analyst Mark Sue, saw the results and Chambers' comments as positive.
'The confidence from increased bookings and orders should be welcome news to long-term investors,' he said. 'Things are improving even though I don't think John Chambers wants to wave a green flag just yet.' Shares in Cisco initially rose about 3 per cent after its quarterly results slightly beat expectations and Mr Chambers said in an earlier statement that he saw 'positive signs' in economic and order trends. After Mr Chambers' comments on the call, the stock backpedalled to US$21.51. Cisco shares had closed at US$22.17 on Nasdaq.
0 comments:
Post a Comment